Stimulus funding will increase deficit

Thursday

Jan 31, 2008 at 2:00 AM

WASHINGTON — The Treasury Department said Wednesday it will sell $22 billion in debt at its quarterly auction next week as officials study ways to finance the economic stimulus package, which is expected to boost this year's deficit by more than $100 billion.

MARTIN CRUTSINGER

WASHINGTON — The Treasury Department said Wednesday it will sell $22 billion in debt at its quarterly auction next week as officials study ways to finance the economic stimulus package, which is expected to boost this year's deficit by more than $100 billion.

The department said it will auction $13 billion in 10-year notes on Feb. 6 and $9 billion in 30-year bonds on Feb. 7. The $22 billion being raised is slightly higher than the $18 billion raised three months ago.

That had been the smallest amount raised during a quarterly refunding operation in more than 20 years. However, the government's borrowing requirements are expected to rise significantly this year, reflecting a higher federal deficit.

The federal deficit for the budget year that ended last September, totaled $162.8 billion, a five-year low. However, some private forecasters believe the deficit for the current budget year could rise to $400 billion, close to the all-time high of $413 billion reached in 2004.

The sharp increase in the deficit will reflect a stimulus package that Congress is now debating, which is expected to add $100 billion to the deficit total for this year. The increase will also reflect the adverse affects of the economic slowdown, which will trim tax collections and boosts government payments for such things as unemployment insurance and food stamps.

Anthony Ryan, Treasury's assistant secretary for financial markets, said that the Treasury is already ways that the economic stimulus package can be financed.

The proposal passed by the House and the one being considered by the Senate both contain as a central feature billions of dollars in tax rebates to Americans in the late spring and early summer. The hope is that they will spend that money, giving a boost to an economy that is flirting with a recession.

The Commerce Department reported Wednesday that the economy grew by a barely discernible 0.6 percent in the final three months of last year and some private economists believe the gross domestic product could actually fall into negative territory in the current quarter.

In a statement, Ryan said Treasury is considering increasing the size of its bill offerings, short-term securities that range in length from a few days to one, three or six months. These Treasury bills now represent about 22 percent of Treasury's total debt portfolio, down from 27 percent six years ago.

Advertise

Original content available for non-commercial use under a Creative Commons license, except where noted.
seacoastonline.com ~ 111 New Hampshire Ave., Portsmouth, NH 03801 ~ Privacy Policy ~ Terms Of Service